Finding the Right Business model
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- 1. Infosys BPOPoint of ViewAll the Right MovesPart I Finding the Right Business Model:A Combination of SaaS, BPO & Licensing Tailored for YouMark DePhillips and Gordon Beckhamwww.infosysbpo.com
2. Its not easy being an insurer today. New technologies, newmarkets and new business models are having a ripple effecton everything from consumer expectations to businessoperations. With the pace of change increasing exponentially,there are two tenets to consider when it comes to finding theright business model. One: what works today will not worktomorrow. Two: the right business model for one insurer is notthe right one for all.Many insurers are now considering transformation, enabledby IT and BPO, to address new priorities. But theres alwaysthe danger of casting too rigid a mold and forming structuresthat cannot be easily reshaped. Lets say an insurer licenses anenterprise-wide policy administration system, or deploys a full-blown SaaS model, or engages an end-to-end platform BPOsolution. What if the insurers needs change tomorrow? What ifa better model makes more sense at that point in time? Whatif there is no way to reverse the hard-cast transformationalmold?The answer lies in building a business model embedded withthe capacity to change, based on both what is anticipatedand what is not. This begins with asking the right questions,finding the right model, and then making the right moves. 3. Simply put, theAsking the Right Questionsright businessmodel is whatLife insurance companies today are increasingly examining their businessmodels with an eye towards changing them. Many factors are driving thisoptimizes yourexamination including heightened competition, aging labor forces and/or businessinfrastructure, the need to change or augment traditional distribution models,and the need to introduce new products and/or existing products in newmarkets / emerging economies.The pace of change is increasing exponentially. Disruptive new technologiescontinue to challenge us with both risk and opportunity. It seems like onlyyesterday that being able to do business end-to-end on the internet was apotential differentiator, and now it is simply table stakes as we are challengedby the rise of the mobile device. Regulatory oversight is increasing, addingcomplexity and risk. The list goes on and on.So what is the right business model? Simply put, the right business model iswhat optimizes your business. Simple to say, but what does this mean? Wewould suggest that there are two key elements:1. What works today will not work tomorrowAs we hear over and over again, the only thing that is certain is change. As isthe case with many industries, the focus of changing a business model in ourindustry can be somewhat near-sighted in nature. We want to optimize for thehere-and-now and the foreseeable future. We build upon what we know, andwhat we can see in the near future.Realistically, how long will this business model remain optimum and relevant?5 years? Maybe. 10 years. Doubtful. If you step back 5 years, how manycompanies had a Facebook page? Today the question is: who doesnt? Clearly,we dont know the precise contours of the future but we do know that changewill be omnipresent.2. The right business model for any one insurer is not the right one for allThere are a number of key questions to review when defining a change to abusiness model, and the answers to these will vary. Although not germane tothis discussion, we would also stress that these questions need to be answeredhonestly, not aspirationally. Here are some of the fundamental ones: What are your organizations core competencies? You can break thesedown in many ways but at the highest level, they would include: productdevelopment, distribution, customer service, sales / marketing, IT,operations, finance. What are the core competencies that can differentiateyou in your market space, the ones which you want to drive deep into everypart of your organization? What are your weaknesses as an organization? Peter Drucker said somethingabout a managers task which includes making weaknesses irrelevant. Allright, so what are your weaknesses, and how can you make them irrelevant? How much transformation can your organization tolerate? Is it better to beevolutionary or revolutionary? What is your organizations realistic appetitefor change and how could this evolve over time?Again, the list goes on. Looking at these, they seem like bedrock-type questionswhich dont really change, and yet lets go back to the first element; the onlything which is certain is change. We believe that the answers to seeminglyfoundational questions such as what are core competencies, weaknesses,and appetite for transformation can and will change over time. This meansthat in building a business model, you need to build in the capacity to change not just what you anticipate, but also what you dont anticipate. 4. Finding the Right Business ModelWhile asking the right questions is one thing, what does it all mean to defining your service / IT business model? For most companies,the answers to questions in the previous section drive a decision to license a policy administration system, deploy a Software-as-a-Service (SaaS) model or engage a Platform BPO solution (BPO providing both policy administration platform and BPO services foroperations). We would suggest that just as your business imperatives change, so must your service model. Also, for many, hard linesare drawn around each of those models, whereas a mix or hybrid solution may be the right answer. Some points to consider:You feel strongly that you want to maintain ownership over client or agent interactions, so you may be leaning1towards a License or SaaS model.Alternative to think about: Consider a hybrid SaaS/BPO solution where your client-facing activities are done in aSaaS mode, while your personnel and back office activities are handled by a BPO provider.You feel strongly that IT is a core competency and long-term differentiator but like many other companies, theproject and To-Do pipeline is years-long. The traditional approach is to license a policy administration system2and then spend 4x to 15x over license cost for implementation services. What did that fundamentally accomplishbesides a huge spend?Alternative to think about: Consider a SaaS deployment from a qualified BPO provider with an option to license thetechnology, when and if you are ready to do it. Over time, your needs and/or appetite for change will evolve. Perhaps your vision is that long term you want to move service as much as possible to an external outsourcing partner but realistically you know the appetite for3transformation is evolutionary within your organization. You need to walk before you run. Solution: Deploy a full SaaS model upfront with the ability to migrate selected functions to a BPO provider over time.The right business model will change and evolve in fundamental ways over time. Just a few years ago, it wasnt really possible toconsider such flexible solutions. This is not the case anymore, and you can capitalize on this opportunity by creating a flexible modelthat has the capacity to change with your organizational needs. 5. How Two Insurers Made the Right MovesInfosys is one of a very limited number of BPO partners who can provide a high level of flexibility (platform plus services) in a hybridmodel that can change as your business changes. We would like to share two recent examples of clients taking advantage of thisflexibility.Case AThe situation: Client A is a fraternal insurer whose existing clients and agents are key to attracting new business. They wantedthe maximum savings they could achieve from both upgrading their platform and outsourcing service, while at the same timecontrolling client and agent interactions.Infosys solution: Client A is migrating all their legacy business to Infosys proprietary Policy Administration Platform, VPAS Life.We are deploying a hybrid SaaS/BPO model where the client contact center will be staffed by Client A. Service personnel andback-office administrative activities, such as financial and non-financial requests, will be split onshore and offshore to achievemaximum cost savings.Future state options: The service model could move more in either SaaS or BPO direction with the evolving needs of Client A.Case BThe situation: Client B is an insurer who has gone through major changes in the last year, including being acquired by a privateequity firm and going from a run-off mode to aggressive plans to ramp up sales under new ownership. Client B was an existingclient and prior to their acquisition, outsourced service on an end-to-end basis. Under new ownership, Client B wanted toassume the agent contact responsibilities as well as new business processing, both of which are critical to building sales in anew distribution channel.Infosys solution: Change service model to allow Client B to provide contact center and new business services in a SaaS mode,while continuing to handle end-consumer contact and back-office administrative services in a combined onsite/offshore model.Future state options: As in Case A, the service model could evolve along SaaS-BPO continuum in either direction.Client A is keeping all their options open as they move forward, and Client B made a change to their service model that theywould never have envisioned 18 months previously. 6. Clearly, what is right today will not be right tomorrow, and what seem like bedrock decisions willpotentially change. We would suggest that when considering a change in your service model, althoughyou need to clearly focus on what your needs are now and in the foreseeable future, you must alsoThe Way Forward ensure that you have flexibility to change as your environment changes. This doesnt necessarily haveany material cost impact. In addition to identifying the right business model, it also means working witha partner who is first and foremost aligned with you one who can keep all your options open as yourneeds change.We welcome your comments and feedback on this Point of View. Tell us what you think by writing to:[email protected][email protected] 7. About the Authors Mark DePhillips is Senior Vice President of Insurance Services and leads BPO Operations for Infosys VPAS Life policy administration platform. Mark has over 25 years of experience in administration and information systems in the life insurance industry. Before joining McCamish in 2009, Mark was an officer at Allianz Life and Prudential Financial, in addition to being part of an Executive Team at DVFS, Inc., a leading provider of operations and technology solutions for the Life Insurance industry. MarkMark DePhillipshas built and led large technology and service delivery teamsSenior Vice President, which have been nationally recognized for service excellence.McCamish Systems,Mark has also played a role in numerous industry initiatives asan Infosys BPO company part of NAVA and LOMA. J. Gordon Beckham, Jr. is President and Chief Executive Officer of McCamish Systems, an Infosys BPO company. Gordon joined The McCamish Group (TMG) of companies in 1988 as Director of Marketing. Until 1995 when McCamish Systems was formed, TMG was focused on virtual insurance company concepts including product design, distribution and administration. Prior to joining McCamish, Gordon was an international trade finance officer at the C&S National Bank of Atlanta, Georgia. In addition to the positions he holds with McCamish Systems, Gordon maintains his Series 7 General SecuritiesGordon Beckham Representative, Series 24 General Securities Principal andPresident and Chief Executive Officer, Series 63 Uniform Securities Agent State Law licenses. GordonMcCamish Systems,graduated from the University of South Carolina (USC) with aan Infosys BPO company BA in English in 1984 and obtained his Masters in International Business from USC in 1986. Gordon serves on the Boards of the Foundation of the Holy Apostles, the Georgia Public Policy Foundation and the National Parkinson Foundation. 8. About Infosys BPOGlobal organizations depend on Infosys BPO Ltd, thebusiness process outsourcing subsidiary of Infosys Limited(NASDAQ: INFY) to deliver measurable business value.Infosys BPOs strong focus on industry solutions, technologyand a consulting based approach has created new engagementmodels to help clients build tomorrows enterprise.For more information, contact [email protected] 2012 Infosys Limited, Bangalore, India. Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of thetrademarks and product names of other companies mentioned in this document.